STOCKHOLM -(MarketWatch)- Two Chinese companies planning to buy Saab Automobile aim to return the troubled car maker to profit in 2014, investing some 20 billion Chinese yuan renminbi (EUR2.2 billion) over the next five to six years while slashing costs by 1 billion Swedish kronor ($156.7 million) and shedding 500 jobs, corresponding to 15% of its workforce.

The chief executive of Pang Da Automobile Trade Co. (601258.SH), Pang Qinhua, told reporters Monday that the vehicle dealer, together with auto firm Zhejiang Youngman Lotus Automobile Co., plan to invest around EUR2.2 billion in Saab Auto over five to six years, including EUR610 million for the 2012-2013 period.

Pang Da and Youngman Friday signed a memorandum of understanding valid until Nov. 15 to buy Saab Automobile from Swedish Automobile NV (SWAN.AE) for EUR100 million. The companies are aiming for a modest 35,000-55,000 in vehicle sales next year, gradually increasing to 185,000-205,000 in 2016, about 50% more than Saab Automobile's highest ever sales volume at about 130,000 in the mid-2000s.

The plan to turn a profit and deliver positive cash flow in 2014 follows decades of losses, first under General Motors Co. (GM) and later under the leadership of Swedish Automobile, formerly Spykers Cars NV.

Liquidity dried up earlier this year after the company missed its sales targets, prompting Saab Automobile to shut down production, delay salary payments and eventually seek court protection from its creditors to avoid being forced into bankruptcy.

The court-appointed administrator, Guy Lofalk, Monday said that Pang Da and Youngman have a long-term strategy for Saab to move part of the vehicle assembly to China and to use Pang Da's distribution network to boost sales in the fast growing Chinese car market.

The Chinese companies will supply a EUR50 million bridging loan to pay wages and complete the reorganization. They will then invest EUR610 million, or RMB5.5 billion, to restart production, settle debts and fund operations for 2012-2013, Swedish Automobile said. In addition, a EUR63 million installment of Saab's existing loan from the European Investment Bank should be released, Lofalk said.

The Chinese investors will fund the expansion of new car models, including the 9-5 SportCombi and the 9-4X due to be launched in 2012, as well as additional operations to be set up in China, Swedish Automobile said. Pang Da's CEO said these investments combined would total EUR2.2 billion.

The restructuring plan includes continued vehicle design and development in Trollhattan, Sweden, and new distributorship agreements in emerging markets such as Russia.

Stefan Lofven, head of the union IF Metall, said he expected production and development to continue in Trollhattan and that re-hirings should be possible once sales pick up, even though he regretted the 500 job cuts.

The Chinese investors intend to pay all creditors in full, Pang Da's CEO said at a meeting in Vanersborg, where a Swedish district court Monday decided that Saab Automobile's reorganization would continue as no creditors had asked for the process to end.

Supplier reactions were mixed, with the CEO of IAC Sweden, Marcus Nyman, calling it a "solid plan" while Premier CEO, Kjell-Gunnar Granaas, said he wanted to see the money before trusting any more promises.

"It would have been nice to hear that they will start to pay for deliveries in advance once the production starts up, until the trust can be rebuilt," Granaas said.

The takeover, if successful, would be only the second by a Chinese buyer of a foreign car brand, after Zhejiang Geely Holding Group Co. acquired Volvo Cars from Ford Motor Co.
F, +0.81%
last year. Chinese auto makers have enjoyed strong growth at home but have been eyeing Western markets, where they hope to sell premium vehicles at higher margins, gain access to more advanced technology and broaden their portfolios.

Around 1043 GMT, shares in Swedish Automobile were down 13% at EUR0.54 on the Amsterdam exchange.

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